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GAS PRICES SLAMMING CONSUMERS; $5 GAS FEARED
BOB FROEHLICH: This is the issue. My goodness we are extending this because we are not addressing the real problem and the real problem is there is a great psychological impact on the price of gasoline, every consumer understand that. It is not like the trade balance or something like that after trying to figure out if this is important. It is extremely important because it is in our face every single week. This is why we do not have a comprehensive energy policy. We have to focus on lowering the price of gasoline. It will have the single greatest influence on our economy and extending these payroll tax cuts, they do nothing. All they do is sustain where we are now. Lower the price of gasoline, are you kidding me? That is what will stimulate the economy. We are absolutely focusing on the wrong thing."
GARY B. SMITH: Brenda, I would never argue of increasing taxes, I am in favor of cutting tax rates across the board. I am always in favor or lowering taxes. I think Bob is wrong in one aspect. We do have a comprehensive energy policy. It is to put resources in unproductive areas like wind and solar and cut out the productive areas that we have like oil. The one good not is we are doing more drilling on U.S. soil than we have in the past 25 years. The reason, most of that drilling is on private property. The government property is still being restricted by the current administration. My gosh, it is just simple economics Brenda. I f we opened up those areas for drilling, we would have a larger supply of oil. A larger supply of oil means lower price for gasoline.
STEVE MURPHY: I think we are pointing the finger here at the wrong president about oil prices and gasoline prices. I am not going to say President Bush, it is President Ahmadinejad. The reason why oil prices are spiking so badly right now is over the crisis of Iran moving towards developing nuclear weapons. Let's be realistic about it. It is probably going to get a lot worse. It is probably going to lead to war involving the United States, Israel or both countries and gasoline prices are going to go up a lot more. Now if we are not going to have that situation totally wreck our economy, putting $1,000 as President Obama points out, putting $1,000 a year in a families pocket making about $50,000 a year, that makes a lot of sense in terms of being able to attenuate the impact of the eventuality of gasoline prices spiking up $200 to $250 a barrel because of this Iranian situation.
TOBIN SMITH: Look at this logic. This is sort of like saying you have a heart attack, but take this sugar pill and you are going to feel pretty good for the next nine months. We have a bigger issue here. We know that, to Gary B's point, we have enough oil in both Anwar on onshore that yes, prices are being hit by this uncertainty via Iran, but at the margin, it is the new oil that is coming on that is being available and it is the amount of everyday excess supply that would bring us down to the $85 and $75 price point. We can do it now in the United States, we have this shale oil revolution, we have the Keystone Pipeline that would actually being another 2 million barrels. We could have 5 million extra barrels a day. Trust me I have been in the energy business for a very long time. With that kind of excess capacity we would have $75 oil or lower, it would be profitable to bring out of the ground but we would also have $2.50 gasoline.
JONAS MAX FERRIS: I would like to say that working at a gas station is not experience in the energy industry, but getting back to the actual point here is that the tax is the reason. We are all acting like we need to have the tax break to pay for the high gas. The gas is high because of the tax break that made the economy better. Gas prices go up as the economy improves. Gas prices are about where they were the last time the economy was strong a few years ago it was around $4 a gallon. It is a sign we are over stimulating the economy with too much stimulus spending and too low a tax rate relative to governments pending. I will say all these things you are talking about in the Middle East and Anwar, if they let all the tax cuts go away this year, you will see the price of gas go back to $3.00 a gallon because it will be a drag on the economy and people will not spend that much. You are a chicken before the egg in this gas thing, it is symptom of a strong economy from too much government stimulus and low tax rates.
SANTORUM SPARKS DEBATE OVER INCOME INEQUALITY IN AMERICA
GARY B. SMITH: One hundred percent right Brenda. In fact, income inequality, the ability to achieve income inequality is what made America great. It allowed people like Henry Ford and Andrew Carnegie and Bill Gates even to go out there and take a lot of risks so they could earn a lot of money and they did so and they brought great innovation and productivity to the country. You know Brenda, for people that want income equality, all you have to do is look back at America in the 30's. We had great income equality then and it was a terrible time. Look at the Soviet Union or look at communist China; in fact, China as it still is now Brenda. Income inequality means people like Rick Santorum can get ahead and thrive and grow and it's really what's best for America.
TOBIN SMITH: I would just say this; obviously if you take the term literally people are saying that is somehow about discrimination and that's not what Rick Santorum was talking about and to the point; how many years you go to school; how much risk you want to take; not everybody wants to make a million dollars a year. Not everybody wants to make $100,000 a year and you know part of our system is you are free to make those decisions. This is about a meritocracy. I think that's the point that Santorum makes and it's, to Gary B's point, what has made America great.
STEVE MURPHY: Absolutely. If I'm supposed to quote now from the communist manifesto to each according to his need; no, I completely disagree with that. When it's based on merit, yes, when it's based on whose womb you came out of, no I don't like it, but here is the problem we have with income inequality; Gary B. was absolutely right. We had income equality during the depression. Everybody was poor; actually it was 30 percent, but in the 30 years after the war we had our greatest period of economic growth and the benefit of that was spread out through all social classes. Basically because you could work in a factory at that point in time, obviously and earn a good income. The last 30 years that's not the case. The middle class has been completely stagnant. No income growth in the last 30 years, while the top one percent and I say that statistically not rhetorically, has tripled their income in the last 30 years. That's a problem.
BOB FROEHLICH: Well look, it is the basic foundation of this country. It's what puts the fire in the belly. It's what creates motivation. Why would anyone every work hard? Why would anyone ever want to get ahead if they're not going to get paid or compensated for that? I mean inequality; that's what it's all about. It's the ability to say; I can improve my life; I can improve my quality of living if I work hard, if I take these opportunities. They're not going to be handed to you. If it was easy, everyone would do it. So, if that's the whole system that's in place and it's there for everyone, everyone that wants to make themselves a better quality of life, they can do it in this country.
JONAS MAX FERRIS: Well it is true that only in a communist dictatorship does everybody have the same income. They're looking at this the wrong way because every country has income inequality. If that, in and of itself, is a necessary thing, then why isn't Mexico growing faster than America? We also have income inequality, but we have less income inequality than other countries that have bad systems and more to the meritocracy point, you have the ability, more so than in other countries, to climb in this country to higher levels just on skill. We see more billionaires being created without even college educations than we have in the past in our own country than other countries. So, don't confuse the order of business here which I think Rick Santorum is a little bit.
DOWNGRADE WARNINGS FOR BANKS SPARK WORRIES ABOUT RECOVERY
TOBIN SMITH: Yes [a downgrade would derail the economy]. There are two reasons. Number one; at the margin when you raise credit card rates and when you raise small business loans and make them less available, those companies that are at the margin then start to slow down. We are starting to pick up momentum. The way you kill momentum is cut the legs out from under the people who are just coming out of recovery. That is what happens when those prices go up.
JONAS MAX FERRIS: I think these rating agencies screwed up so bad that they are trying to make up for it by staying ahead of all these downgrades, The U.S. government, the foreign governments, the banks. I think they are causing mischief because we need confidence in our banking sector, it is critical to our economic recovery. I think everybody should take it off the banks. It is five years after the crash in the real estate market. You know, we do not blame the tech companies for the 200 crash with fees and fines on JDS Uniphase. I think it is time to let it go.
STEVE MURPHY: We had an absolute separation under Glass Steagall for 80 years between the banking and investment functions. How did they ever make any money during that period of time if Moody's is right about this? They are absolutely wrong about it. These regulations are not as tough as Glass Steagall.
GARY B. SMITH: I will tell you what Brenda, financial industry is 8 percent of our sector. Just from a macro standpoint, if you more heavily tax 8 percent of the sector and move those funds to a less effective form, which is basically, the government taking the money, it is always less effective than the private sector, you are going to have a drag on the economy. It is as simple as that. It is silly, Toby makes the point financial sector is the life blood of the economy. Don't shut it down now.
BOB FROEHLICH: It puts us on the verge [of recession]. I think what is the most important thing, if you look at the financial services industry, it is that one industry that touches every other industry. There is no other place like it. It does have a greater impact than any of the other sectors out there. To me the most ironic part about this is, think about this, so now after the ratings agencies watched the banks destroy all these investors net worth, now they are saying, "You know we think we might downgrade them." Are you kidding me? I remember it used to be a leading indicator, not it is a lagging indicator. This is a joke.
GARY B. SMITH: Pass on GM, go with Ford! (F) drives up 20 percent by December
BOB FROEHLICH: Show the love all year long! (HSY) unwraps a 33 percent gain in one year
JONAS MAX FERRIS: Never miss a game, even on the go! (VZ) scores a 25 percent profit in one year
TOBIN SMITH: Get in on low natural gas prices! (GTLS) gasses up 35 percent by 2013